American-US Airways Merger: What Frequent Fliers Need to Know

Media reports indicate that merger negotiations between American Airlines and US Airways are in their final stages and that an announcement could be forthcoming in the next few weeks. If a deal is reached and a merger is consummated, the combined airline would have a market cap of over $10 billion and would become the largest U.S. carrier by traffic, ahead of United Airlines and Delta.

What would the impact of a merger be on frequent travelers? Here’s a primer:

What would the new airline be called?

The merged entity would be called American Airlines and its headquarters would be in Fort Worth, Texas, where American currently has its headquarters. American recently unveiled its new logo and livery and the new designs will not only be on the hundreds of new airplanes American is scheduled to receive from Airbus and Boeing in the coming years but would also be displayed on the aircraft that come over from US Airways.

Would the two airlines immediately operate as one airline?

Even after the two airlines merge, the US Airways brand would still be around and the two carriers would operate under separate operating certificates. Northwest Airlines became a subsidiary of Delta Air Lines once those two carriers merged and the Northwest brand disappeared only when the merged airline was granted a single operating certificate. It took 18 months from the time United and Continental announced their merger until the two were granted a single operating certificated by the Federal Aviation Administration. It took the two airlines almost two years to merge IT systems and there were numerous complications along the way.

What global alliance would the merged airline be a part of?

American will remain in the oneworld alliance, a group in which it plays a very strong role. US Airways would leave the Star Alliance although the timetable for that to happen wouldn’t be known for some time.

What changes will passengers see right after the announcement?

Virtually none. The airlines cannot put any changes into place until the merger has closed and even a merger announcement is no guarantee that the deal will be consummated (such was the case several years ago with United Airlines and US Airways). The deal requires approval from the U.S. Bankruptcy Court and the U.S. Department of Justice, the latter having recently turned down AT&T and T-Mobile in a merger attempt. Reviews by the two parties could take several months before any approval might be granted.

What about routes and hubs and cornerstone markets?

If a merger occurs, the new American Airlines will have more than 320 destinations and eight hubs. In past mergers, including American’s acquisition of some of TWA’s assets in bankruptcy as well as United/Continental and Delta/Northwest, smaller hubs eventually saw fewer flights. In this case, however, since the two parties are merging to compete with Delta and United, such changes might not be as dramatic. Further down the road, American would rejigger its network to make the best use of its slots at key airports in the U.S. and abroad.

What happens to frequent-flier accounts and elite status?

The merged airline will keep American’s AAdvantage program, the second such airline loyalty program in the world and currently the largest, in place, and members of US Airways’ Dividend Miles program will be able to transfer their miles to a new or existing AAdvantage account. The combination could give some fliers million-mile status earlier than expected.

What if a merger doesn’t take place?

Some pundits have opined that US Airways could be at risk without merging with a larger partner. American, however, could most likely go it on its own.

Three airline mergers have been approved in the past decade, United-Continental, Southwest-AirTran, and Delta-Northwest, and the American-US Airways merger is less likely to harm competition because it has fewer overlapping domestic routes than the other airlines had.

However, as merger partners AT&T and T-Mobile and Anheuser-Busch Inbred and Grupo Model have found, it isn’t over until the fat lady sings or at least signs off on the deal.

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